Two Assets Have the Following Expected Returns and Standard Deviations

question 72

Multiple Choice

Two assets have the following expected returns and standard deviations when the risk-free rate is 5%:
Asset A E(r_A) = 10% σ_A = 20%
Asset B E(r_B) = 15% σ_B = 27%
An investor with a risk aversion of A = 3 would find that ________ on a risk-return basis.

• A) only asset A is acceptable
• B) only asset B is acceptable
• C) neither asset A nor asset B is acceptable
• D) both asset A and asset B are acceptable

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Definitions:

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Pertaining to the use of computers, the internet, or other digital technology to facilitate processes, transactions, or communications.

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Electronic fund transfers initiated by using a debit card, allowing the cardholder to withdraw cash or make purchases directly from their bank account.

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The complete duration taken to collect payments owed by customers after a sale has been made.